VZCZCXRO3050
PP RUEHCI
DE RUEHKA #1590/01 2740943
ZNR UUUUU ZZH
P 010943Z OCT 07
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 5218
INFO RUEHLM/AMEMBASSY COLOMBO PRIORITY 8107
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 1838
RUEHKT/AMEMBASSY KATHMANDU PRIORITY 9296
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0200
RUEHCI/AMCONSUL KOLKATA PRIORITY 0932
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
UNCLAS SECTION 01 OF 02 DHAKA 001590
SIPDIS
SIPDIS
STATE FOR EEB/TPP/ABT GCLEMENTS
COMMERCE FOR ITA/OTEXA MD'ANDREA
STATE PASS TO USTR CMILLER
E.O. 12958: N/A
TAGS: ETRD ECON KTEX BG
SUBJECT: BANGLADESH TEXTILES AND APPAREL PRODUCTION
REF: STATE 114799
1. Summary: Bangladesh has performed well in the post-quota
era, despite fears of competition from China and India. In
2006 it raised its share of the U.S. market, and sales to the
EU market, helped by duty-free access, have soared. The
volume of exports increased by 16 percent in the year ending
June 30, 2007, despite several months of political turmoil
and labor unrest. Overall prices in the Ready Made Garment
(RMG) sector fell by approximately one percent from the year
earlier. The industry continues to face challenges related
to increased global competition, infrastructure, governance
and political uncertainty. End Summary.
Requested Data
--------------
2. Post is pleased to provide the data requested reftel,
together with information on the sources and reliability of
the data. Answers below are keyed to reftel questions. Data
provided for fiscal years (FY) 2006 and 2007 represent the
Bangladesh fiscal years which ended June 30, 2006 and 2007,
respectively.
A) Total Industrial production in calendar year 2006 was USD
17.4 billion and in calendar year 2007 is projected at USD
19.1 billion.
B) Total apparel production in FY 2006 was USD 8.1 billion
and for FY 2007 was USD 9.4 billion.
C) Information on the share of textiles and apparel in
Bangladesh,s total imports is not available. However,
approximately 77% of Bangladesh,s total exports were in the
textile and apparel sector in FY 2006 and 78% in FY 2007.
D) Exports to the United States in this sector came to USD
2.6 billion in FY 2006 and USD 3.1 billion in FY 2007.
E) Reliable data on total manufacturing employment is scarce.
However, it is estimated that approximately 10% of
Bangladesh,s 60 million-strong labor force is engaged in
manufacturing, or roughly 6 million people (WB).
F) Approximately 2.4 million were employed in ready made
garment (RMG) manufacturing in 2006. Data on textile
employment is less reliable, probably ranging between 500,000
and 900,000. These figures do not include those engaged in
traditional handloom production or textile-related service
employment.
3. Data sourcing and reliability: Post collected information
from the three major industry associations ) Bangladesh
Textile Mills Association (BTMA), Bangladesh Garments
Manufacturers and Exporters Association (BGMEA) and the
Bangladesh Export Promotion Board (BEPB), as well as from the
World Bank,s Development Indicators database (April 2007)
and the Asian Development Bank,s Quarterly Economic Update
(June 2007). Finding current and accurate data is difficult
in Bangladesh because of the unavailability of timely
official data, lack of coordination between different
agencies, lack of trained workforce in this area, and the
long processing time to organize collected data. Some of the
figures were derived from data in different sources. The
data provided is believed to be the best information
available.
Additional Information
----------------------
4. Bangladeshi RMG manufacturers are under continuing
pressure from buyers to reduce prices. Having already
declined in 2005-06, prices continued to decline in 2006-07.
The total value of exports continues to rise because of
expanding export volume, but profit margins are thinning.
BGMEA reported a reduction in orders beginning in late 2006,
citing growing competition from Vietnam and Cambodia and a
weakened U.S. market.
5. Bangladesh has clearly benefited from U.S. and EU
restrictions on certain Chinese apparel exports, and many in
the industry worry that the removal of those restrictions in
2008 will negatively impact the RMG sector. The government
DHAKA 00001590 002 OF 002
has neither imposed nor considered imposing quotas or other
restrictions on Chinese textile and apparel products, as
Bangladesh depends on Chinese imports for textile industry
inputs.
6. The government of Bangladesh has no policies in place to
address dislocated or displaced workers. Bangladesh already
has some of the lowest labor costs in the global textile and
apparel industry. Bangladesh's success in the global market,
coupled with rising domestic prices for staples, has created
pressure for increased wages. These pressures have created
tension between factory owners and labor, with owners feeling
they have less flexibility in addressing labor demands.
Bangladesh has been under a state of emergency since January
2007, when an interim, or caretaker government, took power
with a mandate to prepare the country for free and fair
national elections, which are currently scheduled for
December 2008. The overall political environment of
emergency rule has restricted labor union activity.
7. Chronic problems of infrastructure and governance
continue to bedevil the industry (and economic growth
generally) and threaten the industry's competitiveness in the
medium term. Electricity demand is growing at 8% annually,
yet there has been a net loss in generating capacity over the
past five years due to lack of new plants and deterioration
of the installed base. Operational capacity is estimated at
50%-60% of current demand, and rolling blackouts are common.
Although manufacturers often have captive power generators or
standby diesel generators, high fuel costs and unreliable
natural gas supplies increase costs and undermine
productivity. The interim government has had some
infrastructure successes, particularly in port management and
facilities. Efforts are also underway to streamline customs
procedures, although it remains to be seen how effective
these efforts are in improving efficiency.
8. Bangladesh is not a partner in any free-trade agreements
with the United States. Because of Bangladesh,s recent
expansion in exports, some industry experts fear that
hostility from AGOA and CAFTA partners may lead to
unfavorable trade policies in the future. Although the
caretaker government has taken some positive steps, one
disadvantage is that the state of emergency,s limits on
political activity have restricted labor organizations. Such
restrictions, along with the failure of factories to comply
with labor reforms, have prompted a review of Bangladesh's
GSP status.
Pasi